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As boardroom warriors go, Casey Cogut is a decorated veteran with a drawer full of medals — or at least deal toys. As a partner at New York powerhouse law firm Simpson Thacher & Bartlett, he had helped Henry Kravis prevail in the $25bn brawl for RJR Nabisco in 1989.
He was also in the middle of some of the landmark takeover stand-offs of that go-go decade that ended up in Delaware courtrooms. Now in his 70s and retired from practice, Cogut has moved to the other side of the table, serving as a corporate director at multiple Fortune 500 companies.
That new role has brought back some of the drama of his previous life. In late February, a Delaware judge invalidated a “poison pill†set up by the board of directors of pipeline group Williams, ruling that the measure improperly constrained shareholders.
Poison pills seek to thwart hostile parties who threaten to buy a large stake in a company. Cogut was a lawyer in the 1980s just as the poison pills were developed. As director of Williams, he had suggested the company adopt the scheme that the court has now swatted away.
According to one law firm, the ruling is the first instance in two decades that the Delaware court has rejected a poison pill, a potential shift in the seemingly settled law regarding the corporate defence mechanism. The central role of a legal luminary, Cogut, has only added to the drama.
For a dull transporter of oil and gas, Tulsa-based Williams has experienced a traumatic few years. A $20bn takeover by rival Energy Transfer was scuttled by a legal mishap that allowed its suitor to escape an agreement in 2016. Later, Williams faced attacks from sharp-edged activist investors that led to turmoil and turnover in the boardroom.Â
By March 2020, the company was facing a crisis as the Covid-19 pandemic shut down the global economy just as an oil market price war broke out. Earlier that month, as Williams’ share price sagged, Cogut broached the idea of a poison pill. Developed in the 1980s by law firm Wachtell Lipton, these schemes are triggered if a shareholder exceeds an ownership threshold, say 20 per cent. If that level is breached, all the other shareholders would get the “right†to buy stock at a nominal value rendering the shares of the interloper near worthless.
The early poison pills in the 1980s appeared in a world of aggressive raiders who in effect tried to coerce shareholders into tendering their shares for a lowball buyout bid. The courts had upheld the pill in principle, believing that boards of directors deserved the buffer it could provide by allowing them to either negotiate a fair deal or prove that their business plan was better.
By the 2010s, poison pills had evolved to take on activist investors who wanted sizeable minority stakes to possibly take control of the board — a prospect that Cogut and later the Williams board began to fear.
By March 18, the board had approved a pill with a 5 per cent ownership threshold and one-year life: 10 per cent had traditionally been the lowest trigger companies had been able to get away with. Over 2020, Williams’ stock recovered but the board did not remove the poison pill.
Ironically, another famed lawyer acting in a non-legal role would enter the scene. Steve Wolosky, who represented the likes of Elliott Management in proxy fights, happened to be a Williams shareholder. He was upset enough to sue the board. Poison pills could be determined to be over the top if they prevented legitimate shareholder agitation.
The Delaware court found the features in the Williams poison pill impermissible. There was the low 5 per cent threshold. But the pill also prevented groups of investors from innocuous behaviour such as attending a conference, for example, which tripped a provision that prevented multiple funds from ganging up on Williams. All the while, the company had identified no specific threat.
Lawyers have since expressed less shock about the ruling and more surprise and exasperation at Williams. Its poison pill to them was aggressive and the company did not seek a shareholder vote on the scheme. One top lawyer told the Financial Times that by litigating it to the end, Williams had now created unfavourable case law for a future poison pill case.Â
An appeal to the Delaware Supreme Court is not out of the question, said a person in the middle of the dispute. Whatever the final outcome, the situation is a juicy bookend for Cogut’s extraordinary dealmaking career.
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